Managing risks, side payments, and multi-institutional enlargement: the role of US defence, big four investment agreements and candidate risks on NATO and EU enlargement

Risky investments under incomplete information (i.e. about future behaviour, future state of the world) characterize international institution enlargements. In clubs, a logic of lowest common denominator accompanies member heterogeneity as weaker states reduce collective good quality to their suboptimal level. Disturbances in a good’s provision are attenuated if a club provides diverse goods, however reductions are problematic when it produces fewer/scarce goods. Heavily invested, stronger partners may offset candidate risk through bilateral contracting. NATO & EU enlargement after the cold war provides a set of states to examine the effects of risks and bilateral (security/economic) investments on membership offers in either or both organizations providing a test of rationalist claims. Despite distinct criteria, perceptions of candidate’s (political or investment) risk shaped when offers were given. Finally, research treats enlargements as separate despite simultaneous occurrence. This research contributes by (1) specifying a simultaneous model of enlargements linking the processes indirectly and (2) examining risks and side payments. Results confirm security side payments increased chances of a NATO offer, but economic equivalents had no effect on EU offers. Reducing risks increased the likelihood of offers. Finally, the unmeasured factors correlated with offers in both were positive and substantively significant.